Price Instability and Its Influence on Household Expenditure in Emerging Nations

Abstract

This research explores how fluctuations in inflation influence household expenditure across developing and transitional economies. Drawing on panel data encompassing ten emerging nations, the study applies both fixed and random effects estimation techniques to evaluate the impact of rising price levels on consumer behavior. The analysis reveals a consistent and statistically significant inverse relationship between inflation rates and household spending, indicating that escalating prices diminish purchasing capacity and limit consumption activity. The outcomes underscore the importance of effective monetary and fiscal strategies aimed at mitigating inflationary shocks and preserving household welfare within vulnerable economic systems.